OUE REIT 1Q2024 Business Updates

OUE REIT 1Q2024 Business Update

On 24th April 2024, OUE REIT released their 1Q2024 business update. As per my latest financial progress update, OUE REIT makes up 2.03% of my stock portfolio in terms of value. I have no plans to increase my stake but to keep it in my stock portfolio to continuing collecting dividends.

OUE REIT was formerly known as OUE Commercial REIT. As of 31 December 2023, it is one of the largest diversified Singapore REITs (“S-REITs”) with total assets under management of S$6.3 billion. OUE REIT has assets across hospitality, retail and office across Singapore and Shanghai. In Singapore, OUE REIT owns two hotels, Hilton Singapore Orchard and Crowne Plaza Changi
Airport. It also owns Mandarin Gallery which is located near Hilton Singapore Orchard. Regarding the offices, OUE REIT owns OUE Bayfront, One Raffles Place and OUE Downtown Office in the Central Business District (“CBD”).

In Shanghai, OUE REIT owns Grade A commercial asset Lippo Plaza that is located on Huaihai Middle Road, one of Shanghai’s established core CBD locations in the Huangpu district of Puxi.

1Q2024 Financial Performance

In 1Q2024, OUE REIT’s Gross Revenue and Net Property Income (“NPI”) increased by 9.5% and 6.9% YoY to S$74.9 million and S$60.5 million respectively. The increase was mainly driven by higher contributions from Hilton Singapore Orchard and the resilient performance of Singapore commercial properties.

As mentioned in 3Q2023, REITs that have commercial and hospitality segments will benefit from the post COVID recovery due to people going back to work and increasing tourist arrivals.

1Q2024
(S$m)
1Q2023
(S$m)
Change
Gross Revenue74.968.49.5%
Net Property Income60.556.66.9%

Debt

OUE REIT 1Q2024 Debt Maturity

As of 31st March 2024, OUE REIT’s gearing stood healthy at 38.8%. The weighted average cost of debt remained stable at 4.5% per annum, while the weighted average term of debt was 2.2 years. 60.0% of OUE REIT’s total debt was hedged to mitigate against sudden interest rate hikes.

OUE REIT has no refinancing needs until the second half of 2025.

Occupancy

As of 31 March 2024, OUE REIT’s Singapore office portfolio remained stable with committed occupancy at 95.1%. OUE REIT had also recorded a positive rental reversion of 12.6% for office lease renewals. Average passing rent increased by 1.0% quarter-on-quarter to S$10.50 per square foot per month in March 2024.

In Shanghai, Lippo Plaza’s committed office occupancy decreased by 7.8 percentage points quarter-on-quarter to 75.5%. Average office passing rent for Lippo Plaza declined 1.1% quarter-on-quarter to RMB 8.40 per square metre per day. As per OUE REIT, Lippo Plaza contributed only 7.9% of the REIT’s portfolio revenue.

OUE REIT 1Q2024 RevPar

In 1Q2024, the hospitality segment revenue per available room (“RevPAR”) surged 23.3% YoY to S$280 supported by the continued recovery in the hospitality sector. Hilton Singapore Orchard’s RevPAR grew by 32.3% YoY to S$308 on the back of higher occupancy. despite the enlarged room inventory of 575 rooms, Crowne Plaza Changi Airport’s RevPAR also rose by 5.1% YoY, reaching S$227.

OUE REIT Share Price and Dividend Yield

OUE REIT Share Price 29-May-2024

OUE REIT current share price is S$0.26. Based on FY2023 full year distribution of 2.09 cents, OUE REIT’s current dividend yield is 8.04%.

Summary of OUE REIT 1Q2024 Business Update

Based on OUE REIT’s latest business update, the pros are:

  • Gross Revenue and Net Property Income increased by 9.5% and 6.9% YoY to S$74.9 million and S$60.5 million respectively.
  • Gearing stood healthy at 38.8%. No refinancing needs until the second half of 2025.
  • Singapore office portfolio committed occupancy is high at 95.1%.
  • Revenue per available room (“RevPAR”) surged 23.3% YoY to S$280 supported by the continued recovery in the hospitality sector.
  • Attractive current dividend yield at 8.04%.

The cons are:

  • Lippo Plaza’s committed office occupancy decreased by 7.8 percentage points quarter-on-quarter to 75.5%. In my opinion, I hope OUE REIT divest Lippo Plaza.

Based on the data, the pros outweigh the cons. Why are investors not buying OUE REIT? 😉

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